US prices cloud hampers Nikkei

SIGNS of growing inflation in the US, which could mean higher interest rates on the way, took some of the power out of the recent rally in Japanese stocks today, and left other markets mixed.

A 0.5% rise in US consumer prices in April was the biggest jump in almost 12 months, and although the major factor was higher oil prices, the unexpectedly strong showing reminded investors that the days of ultra-cheap money are probably over.

Lacklustre performances on Wall Street were reflected in a moderate 86.64 point gain to 11,729.61 by the Nikkei 225 Average. Hot technology stocks ran into profit-taking, which saw recent winners such as Tokyo Electron down almost 2%, but the market was lifted by some solid buying of old- economy counters expected to benefit from the now apparent slowing of Japan's slump. Mitsubishi Heavy, Japan's top machinery maker, jumped almost 4% after forecasting strong growth this year.

The downside was also limited by continued acceleration among top car manufacturers. Their recent optimistic earnings outlooks were underlined by strong sales in the US, which pushed production up more than 3% in April. This spurred shares of Toyota, Honda and Nissan to further heights, as gains reached more than 1%.

A brightening picture of Hong Kong's economy painted by the International Monetary Fund failed to support prices as profit-taking rattled property stocks, which have gained as much as 12% in their recent rally.

The Hang Seng index lost 5.6 points to 11,832.8, led down by heavyweight developers Sun Hung Kai and Sino Land. The IMF predicted that Hong Kong's economy was set to expand by 1.5% this year, after a thin 0.1% rise in 2001. This was of little comfort to recent investors in developers' stocks, which were hit by interest rate jitters and warnings that rises in residential prices were premature.

Weak chip stocks in Taiwan saw the Weighted Average fall 93.49 points to 5817.20. Bank stocks gained some support after fund-raising exercises among the bigger houses fuelled expectations of a round of consolidating takeovers in the overcrowded sector.

After a strong three-day rally, South Korean stocks succumbed to light profit-taking among heavyweight chip producers. Local leader Samsung Electronics shed 1.3% as the Kospi fell 1.51 to 861.11. Singapore's Straits Times index lost 11 to 1736.3 as investors began to back away from recently popular technology stocks. Singapore Airlines shares climbed away from the rest with a 0.75% gain following signs of improving traffic.

Selected buying of blue-chips countered a slide in News Corp shares to push Australia's All Ordinaries up 70.6 to 3395.3. After Wednesday's 14% surge, News Corp stock ran out of breath as the lack of direction in New York encouraged profit-taking, which pared 1% off the price.